Labor & Employment Law

For three decades Kaufman & Canoles has been educating human resource professionals in the Hampton Roads region on updates and changes in employment law with the Annual Employment Law Update. This year’s pearl anniversary theme is The Times They Are A Changin’ and the update will feature new information and popular employment law subjects including; workers compensation, unemployment claims and Obamacare to name a few.

Kaufman & Canoles Employment Law Update began 30 years ago when Member and Chair of the Labor & Employment team Burt Whitt, wanted to try a new way to bring current clients and regional human resource representatives up to speed with law changes. It was the first seminar of its kind in Virginia and remains the best attended. Now approaching its 30th birthday, thousands of human resources professionals have attended the seminar and its agenda has been modeled by competitors across the region making it a success the firm hopes to continue for years to come.

Keeping with tradition, this year’s updates will be presented by subject matter specialists from K&C’s Labor & Employment Law practice group and representatives from key employment agencies in the Hampton Roads area. Additionally, the popular answer booth will be available for participants to question leading presenters regarding employment law during breaks. In honor of the 30th pearl anniversary, registrants will also be entered into a drawing for a chance to win a hand-strung freshwater pearl necklace donated by David Nygaard Fine Jewelers.

This year’s seminar will be at the Virginia Beach Convention Center on November 14, 2013, from 8:30 a.m. to 4:30 p.m. The cost to attend is $345 for the first registrant and $325 for each additional. For more information visit www.kaufcan.com.

Over the years, the K&C Labor and Employment Team has advised employers to be extremely wary of disclosing personal information about their employees. A new law passed by the General Assembly, effective July 1, 2013, provides companies with additional legal support for this good human resources practice. The statute defines an employee’s “personal identifying information” as home or mobile telephone number, e-mail address, or shift times and work schedules. The new law does not prohibit the disclosure – the employer retains the discretion to disclose the information if warranted – but provides that the employer “shall not . . . be required to disclose” the data. Exceptions exist for disclosures mandated by a subpoena, civil discovery, a warrant or court order, or federal law. But in the absence of those circumstances, the new statute confirms that Virginia employers retain the right to decline to disclose personal details about their employees. –Burt H. Whitt

The federal court of appeals in Richmond reminded us of a principle that bears repeating: former employees can win retaliation suits even if the conditions about which they complain are not illegal. In a case involving Virginia Tech, the court of appeals dismissed all of the three female plaintiff’s Equal Pay Act claims, but sent one plaintiff’s retaliation claim under Title VII back to the district court for trial. Maron v. Virginia Polytechnic Institute and State Univ. Ms. Maron, who had complained about sex-based pay disparities, was told by a manager – during a meeting intended to discuss her personal use of e-mail – that she had “shown very poor judgment” and that she needed to “stop pursuing the things that [she was] pursuing or [she would] ruin [her] career in a very public way.” The manager told her she “needed to become invisible” and “stay off the radar for the next six months at a minimum,” while he would be “watching [her] very, very closely.” In addition, there was evidence that the manager told Ms. Maron that he did not “know what [she] did, but whatever [she] did, [she] really pissed [two other managers] off.” Even though these statements, reasonably perceived as threats to terminate her employment, did not rise to the level of “adverse employment action” needed to bring a discrimination case, they could reasonably be found to be sufficient to dissuade a reasonable employee from complaining about discrimination. Thus, reasoned the court, a jury could find in Ms. Maron’s favor on her retaliation claims.

PRACTICAL POINTER

Never allow a counseling session on one topic (e-mail abuse) to wander into another area (complaints about discrimination?) on which the manager may not be as prepared. And it’s seldom a good idea to tell an employee that she “pissed off” managers by complaining, or that someone would “ruin your career in a very public way.” ‘Nuff said. –John M. Bredehoft

A November 1, 2012 Virginia Supreme Court decision may expand radically the potential personal liability of managers, human resources personnel, and other individuals involved in the termination of employment. The sharply-split, 4-3 decision in VanBuren v. Grubb holds for the first time under Virginia law that an individual co-worker – and not only a corporate employer – can be held liable for the common-law tort of wrongful termination of employment. “[W]e conclude that Virginia recognizes a common law tort claim of wrongful discharge in violation of established public policy against an individual who was not the plaintiff’s actual employer but who was the actor in violation of public policy and who participated in the wrongful firing of the plaintiff, such as a supervisor or manager.” (Emphasis added.)

The Court’s opinion may be proof of the old axiom that hard facts make bad law. The allegations of misconduct are extreme (and, since the case was pending on a motion to dismiss, the allegations made by the plaintiff were all assumed to be true). The former employee, a nurse, alleged that her physician/supervisor (an owner of the medical practice) grabbed her, rubbed her “back, waist, breast and other inappropriate areas,” told the nurse that he loved her, encouraged her to leave her husband, attempted to “kiss and grope her,” asked her to “accept his love for what it was and what it could be,” and asked her whether she planned to stay with her husband. When the nurse told the doctor she did not intend to leave her husband, the doctor fired her, giving “no other explanation for terminating [the nurse’s] employment”. The nurse sued both the medical practice and the doctor for wrongful termination. A federal judge threw out the wrongful termination claim against the physician, reasoning that the termination of employment was an act of the medical practice, not the individual. The federal court of appeals asked the Virginia Supreme Court for its opinion, and the Court said the doctor could be held liable personally, as well as the practice, for wrongful termination.

This decision may initiate a sea change in Virginia employment law. Most employment discrimination law in Virginia derives from federal statutes: for example, Title VII of the Civil Rights Act of 1964 governs discrimination on the basis of sex, race, color, religion and national origin; the Age Discrimination in Employment Act prohibits age discrimination, and the Americans with Disabilities Act covers discrimination against individuals with disabilities. The majority of courts have held that these federal statutes do not impose liability on individuals; the corporate “employer” is the entity at risk to be held liable. (The Fair Labor Standards Act requirements of overtime and minimum wage payment are exceptions to this general rule.) Moreover, most of the federal anti-discrimination laws provide for limited damage awards to successful former employees. For violation of the ADA or Title VII, a small company is subject to no more than $50,000 in potential general and punitive damages combined (plus attorneys fees and lost wages). Exposure under the ADEA generally is limited to double the lost wages. However, there is no damage cap for general damages that may be awarded to a prevailing former employee under the common law wrongful termination action. In other words, a former employee who sued his boss and his former company, and convinced a jury that he was fired in violation of Title VII, might persuade a jury to award him two million dollars. But that Title VII award against the individual boss would be thrown out by the court, and the award against the company (assuming it was a small business) would be cut down to $50,000. In contrast, a former employee bringing a common law wrongful termination claim against his boss and his former company, who is awarded two million dollars by the jury, gets the two million dollar judgment. What’s more: the boss is, in most cases, likely to be jointly and severally liable with the company for the entire judgment. The only limit on damage awards for wrongful termination cases is the general Virginia prohibition on punitive damage awards in excess of $350,000.

There was a spate of wrongful termination cases filed in Virginia in the mid- to late-1990s, but few have been filed in recent years. The fact that a wrongful termination claim now exposes individual co-workers and supervisors to personal liability may well revitalize that cause of action. And the standard for liability seems very broad: an individual co-worker or manager may be held personally liable where she or he “was the actor in violation of public policy and who participated in the wrongful firing of the plaintiff.” What does this mean? Hundreds if not thousands of federal court decisions have struggled for decades with the standard of causation necessary to impose liability for a discriminatory termination. Must the unlawful act be the “but for” cause of the termination? What happens in the case of mixed motives, where the employee is fired for a legitimate reason but some bad actor “participated in” the termination? Just this last Term the U.S. Supreme Court first weighed in on the “cat’s-paw” theory of liability, where the person who makes the termination decision is innocent of wrongdoing but is influenced by a bad actor. Under Virginia law, would both be liable if the innocent manager knew of the “bad acts,” even if the manager condemned them? Maybe so! We anticipate many more wrongful termination claims to be filed as a result of this decision.

How can Human Resources and managerial personnel protect themselves from the far-reaching effect of this new decision? Should companies rush to get insurance coverage that would protect their line managers from individual discrimination judgments? Even if available, that likely would cost a fortune. The best advice we have right now is for HR and managers to do what they should always have been doing: train managers, supervisors, and employees; investigate all complaints and take prompt and effective remedial action; document any legitimate disciplinary issues as well as any instances of discrimination or harassment, and make sure termination decisions are made on a fully-informed record, with fairness and consideration.

There are a number of other noteworthy – albeit more legalistic – issues raised by this decision. For example, the Supreme Court says that the claims asserted by the nurse against the corporate employer were viable: “[t]here is no question that [the nurse] has stated a cognizable wrongful discharge claim against her employer.” The Court noted that the “discharge” was “wrongful” because, in part, it violated the public policy underlying Virginia’s criminal prohibition of adultery – but not mentioning that this same Court held the adultery statute unconstitutional years ago! Even garden-variety wrongful termination claims, made against corporate employers, will be given new life by this decision. –John M. Bredehoft

The National Labor Relations Board’s (NLRB) most recent effort to maintain relevance in an era of declining union membership recently landed and it’s a doozy. As you will recall, in the last two years, the NLRB has busied itself with becoming the “Facebook Police” and finding that numerous employers’ social media policies were unlawful because they improperly restricted employees from making negative comments about their employer(s). Not content to stop there, however, the NLRB has now decided that employers cannot have a blanket policy of asking employees who make a complaint about employee misconduct to not discuss the complaint with other employees while the investigation is ongoing. According to the NLRB, such a policy has a tendency to coerce employees and restrains their Section 7 rights (i.e. their rights to engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection). Instead, employers must now engage in a case by case analysis, balancing the employer’s concern for the integrity of its investigation against employees’ Section 7 rights: “[I]n order to minimize the impact on Section 7 rights, it was [employer's] burden ‘to first determine whether in any give[n] investigation witnesses needed protection, evidence [was] in danger of being destroyed, testimony [was]in danger of being fabricated, or there [was] a need to prevent a cover up.’” Banner Health System and James A. Navarro, NLRB case 28-CA-023438 (July 30, 2012).

But, you are no doubt thinking to yourself, employment lawyers are always telling us that employer investigations into complaints of employee misconduct should be kept “as confidential as possible” — don’t these employment lawyers know what they are doing? Well, as hard as this may be to believe, the left hand of the federal government (NLRB) doesn’t know what the right hand of the federal government (EEOC) is doing. EEOC’s 1999 “Enforcement Guidance on Vicarious Employer Liability for Unlawful Harassment by Supervisors” has this to say about confidentiality in investigations of harassment complaints:

Confidentiality

An employer should make clear to employees that it will protect the confidentiality of harassment allegations to the extent possible. An employer cannot guarantee complete confidentiality, since it cannot conduct an effective investigation without revealing certain information to the alleged harasser and potential witnesses. However, information about the allegation of harassment should be shared only with those who need to know about it. Records relating to harassment complaints should be kept confidential on the same basis.

A conflict between an employee’s desire for confidentiality and the employer’s duty to investigate may arise if an employee informs a supervisor about alleged harassment, but asks him or her to keep the matter confidential and take no action. Inaction by the supervisor in such circumstances could lead to employer liability. While it may seem reasonable to let the employee determine whether to pursue a complaint, the employer must discharge its duty to prevent and correct harassment. One mechanism to help avoid such conflicts would be for the employer to set up an informational phone line which employees can use to discuss questions or concerns about harassment on an anonymous basis. (emphasis added).

As can be seen, the positions of EEOC and the NLRB on the issue of confidentiality in investigations into employee misconduct are not only not consistent with one another, they are, to some extent, antagonistic, especially where the employee misconduct at issue is harassment. This, of course, puts employers conducting investigations into allegations of employee misconduct in a very difficult position. Such investigations often are time sensitive and the necessary scope of investigation is not always readily apparent–making the analysis suggested by NLRB, on the surface, highly impractical.

In practice, however, adding the considerations suggested by NLRB to your case file and documenting your analysis of them (e.g. “Do witnesses need protection from possible retaliation– yes; Is testimony in danger of fabrication– yes; and is there a need to prevent a cover up– yes”) may be more of a bother than a burden. Indeed, when you think about it, retaliation is likely a concern with any significant employee complaint. There also is a danger of employees getting together to “get their stories straight” when a complaint against a co-worker or supervisor is being investigated. And, really, when isn’t there a need to prevent a cover up?

So, when faced with your next investigation into employee misconduct, unless your analysis reveals it is one where there is: 1) no concern of retaliation, 2) witnesses may not lie, and 3) a cover up does not need to be prevented, you likely will find yourself erring on the side of keeping your investigation as confidential as possible under the circumstances.
–Scott W. Kezman

Due to budget constraints, the Virginia Department of Labor & Industry stopped administering Virginia’s Payment of Wage Act effective June 25, 2012. According to the VDOLI website, employees must now direct all claims concerning minimum wage or overtime to the Federal Department of Labor’s Wage and Hour Division or, if the employee has a claim for unpaid wages that is a minimum of $2,500 dollars and has documentary evidence in support of a claim, he/she should call the law firm appointed as special counsel at 1-877-VA-WAGE4. This is a dramatic change to the enforcement of the Virginia wage-hour law. –Burt H. Whitt

Like many employment litigation attorneys, more and more of my practice involves federal wage and hour issues. One potent but, in my experience, underutilized tool in an employer’s wage and hour arsenal is the fluctuating workweek (half-time) method of overtime compensation. The fluctuating workweek method of overtime compensation requires an employer to pay an employee a fixed salary that is subject to the FLSA’s “salary basis” rules.[1] This salary is intended to cover all straight time hours of work during a workweek. Thus, when an employee works more than forty (40) hours in a workweek, all of his or her straight time hours have been paid and the employer only owes the additional one-half overtime premium. It is generally good practice to have a written understanding with employees who are being paid pursuant to the fluctuating workweek method.

This method of overtime compensation is useful to: i) minimize overtime liability for non-exempt employees, ii) transition employees classified as salaried, exempt to salaried, non-exempt when there is a concern about the propriety of an employees’ exempt classification and iii) to help settle misclassification claims brought by the Department of Labor or private plaintiffs.

i) With the fluctuating workweek method, as an employee works more hours, his or her effective overtime rate decreases. Here are a couple of illustrations:

Resolution Must increase salary to $522/week so that
employee is paid at least $7.25/hour for each straight
time hour.

So $522/72 = $7.25/hr

$7.25/2 = $3.63 hr

32 hours ot x $3.63/hr = $116.16

Total Compensation = $522 + $116.16 = $638.16

When using the fluctuating workweek method of overtime compensation, an employee’s effective hourly rate will change each week based on the number of hours worked that week; correspondingly, up to the point of hitting minimum wage, the employee’s effective overtime (i.e. half-time) rate decreases as more hours are worked. Thus, while, as demonstrated above, substantial savings can be achieved by using the fluctuating workweek method of overtime compensation where employees regularly work significant amounts of overtime, it remains underutilized because it is not as easily calculated as traditional time and one-half overtime.

ii) The fluctuating workweek is a good “transition” from salaried, exempt to salaried, non-exempt. At one point or another, all employers are faced with re-evaluating exemption decisions. Whether it be because of changes in job duties, personnel or an incorrect original classification decision, it is often difficult to tell a “salaried” employee that they need to punch a clock and will be paid hourly. Converting a salaried, exempt employee to hourly, non-exempt could lead to a DOL complaint or litigation seeking back overtime. Often, even though these employees will earn more if being paid hourly and earning overtime, many employees view a salary as equating to status–and no one likes to see their status decreased — which can cause morale issues. Using the fluctuating workweek to transition these employees allows them to maintain their salaried “status” and be rewarded for all the extra hard work they do for their employer– which is a much more positive–and less likely to lead to litigation– state of mind for the converted employees.

iii) The fluctuating workweek is increasingly coming to the rescue of employers facing costly misclassification suits seeking large amounts of back overtime. Five United States Courts of Appeal and the Department of Labor have permitted employers to calculate back overtime to improperly classified employees using half-time rather than time and a half. One key to having this remedy available is that the salaried exempt employee understand that his or her salary is intended to cover all hours worked by the employee; so adding a sentence to that effect to your company’s standard offer letter to salaried exempt employees can become quite important down the road if there is a misclassification suit.

When addressing your company’s wage and hour issues, keep the fluctuating workweek at the ready– you never know when it may be able to prevent– or extricate–your company from a delicate wage and hour issue. –Scott W. Kezman

[1] The “salary basis” rules require that the salary: i) be at least $455 per week and paid on regular pay periods; and ii) not reduced because of variations in the quality or quantity of the employee’s work. This typically means that if an employee performs any work in a workweek, the employee must be paid the full salary. There are exceptions to this rule when, for example, an employee is absent for one or more full days for personal reasons other than sickness or accident.

The idea that some businesses misuse the “independent contractor” label is not new. Indeed, the “independent contractor” costs less by avoiding certain state and federal taxes and is not subject to the protections of laws such as the Fair Labor Standards Act, the Family and Medical Leave Act, and state unemployment laws, among others. For these reasons, businesses have been misusing the label for years.

In fact, the U.S. Department of Labor estimates that up to 30 percent of businesses misclassify their workers. According to the Obama administration, these misclassifications cost the federal government billions in lost employment tax revenue each year. Not surprisingly, there are significant efforts to increase enforcement and capture that revenue. One such mechanism is the Federal Misclassification Initiative, which provides for the hiring and training of additional government investigators tasked with identifying organizations that misclassify workers.

Pursuant to this Initiative, the Department of Labor has entered into a Memorandum of Understanding (“MOU”) with the Internal Revenue Service, whereby “the agencies will work together and share information to reduce the incidence of misclassification of employees, to help reduce the tax gap, and to improve compliance with federal labor laws.” The DOL is in the process of expanding its information-sharing and enforcement efforts by entering into similar MOU’s with thirteen states (the DOL is “actively pursuing MOU’s with additional states as well”).

These enforcement mechanisms will serve to increase the risk associated with misclassifying workers. Not only will the chances of being caught increase, but the cost of being caught has also gone up, as multiple government agencies may be involved in any enforcement process. As such, it is increasingly important that businesses understand the risk of misclassifying workers and carefully review their relevant policies and procedures. –David J. Sullivan

The recent Supreme Court decision in Home Paramount Pest Control v. Shaffer brings home, in stark fashion, why prudent companies should not rely on possibly-obsolete language in existing contracts with key employees and executives. While properly drafted agreements can restrict post-employment competition by key employees, the Virginia Supreme Court’s decisions exhibit a continuing reluctance to give employers any latitude in enforcing overly-broad covenants not to compete. Home Paramount gives us an extreme case why employers should rely only on language crafted with the most recent decisions in mind.

In 1989, Home Paramount’s predecessor corporation found itself in the same situation: a valued employee had left the company and, in apparent violation of his written agreement, proceeded to compete with his former employer. That case made it all the way to the Virginia Supreme Court as well, and the Court upheld the covenant as reasonable, narrowly-tailored, and enforceable. This next time around, Home Paramount tried to enforce an agreement that was word-for-word identical to the agreement the Virginia Supreme Court held was enforceable in 1989. However, the Court – citing some of its intervening decisions disapproving covenants over the past decade – held that the same language that was enforceable in 1989 was not enforceable in 2011. What’s more, the Court held that the contract was unenforceable “on its face,” regardless of the facts surrounding the violation.

What does this mean for employers? More than anything else, the Home Paramount decision signals the need for periodic review, and perhaps modification, of existing non-competition agreements. What was enforceable a few years ago may not be enforceable now, and the time to find out about the problem and fix it is before, not after, a key employee sets up a competing business next door. As a matter of good human resources practice, we recommend a thorough review of any non-competition agreements drafted more than five years ago, with periodic review of all such agreements perhaps every five years. That way, the Home Paramount Pest Control decision will not end up, er, “bugging” you. –David J. Sullivan

A federal court in the District of Columbia has issued an order temporarily enjoining the NLRB from enforcing its rule requiring the posting of a general notice informing employees of their rights to join a union under Section 7 of the National Labor Relations Act. The posting rule was scheduled to take effect on April 30, 2012. Our report on the issuance of this rule can be found here.

As a result of that decision and others questioning the validity of the NLRB’s rule, the NLRB has issued a statement explaining that “regional offices will not implement the rule pending the resolution of the issues before the court.”

Until further notice, employers do not need to post the notice. Stay tuned, as we will continue to monitor the fate of this rule. –David J. Sullivan